Basel offers wriggle room to keep banks funding rule on track

National banking regulators will get leeway in applying a new rule aimed at ensuring that lenders hold enough long-term funding, the global Basel Committee said on Friday.

The new rule is known as the net stable funding ratio, or NSFR, and the discretion is aimed at gaining national regulator support to ensure the regulation stays on track for next year.

"This should facilitate the implementation of the NSFR, which is expected to begin on 1 January 2018," Basel said in a statement following a two-day meeting.

Banks say the rule unduly penalised them in the way derivatives liabilities are treated when calculating the ratio.

The committee has agreed to allow member countries to apply a much lighter treatment for derivatives liabilities, Basel said.

The rule, part of the Basel III accord aimed at averting a repeat of the 2007-09 global banking crisis, has faced opposition. The U.S. Treasury Department has called for a delay until the NSFR is "appropriately calibrated and assessed" to avoid unnecessary capital and liquidity requirements.

"The committee is considering whether any further revisions to the treatment of derivative liabilities are warranted, and if so, will undertake a public consultation on any proposed changes," Basel said.

Michael Lever, head of prudential at AFME, a European banking industry body, welcomed the announcement.

"It will be important however that these authorities apply this discretion in a proportionate, transparent and consistent fashion," Lever said.

There should also be an appropriate observation period before making any further adjustments, Lever added.

Basel did not comment on whether it made progress this week on completing other Basel III rules which face divisions between Europe and the United States.

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